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Gralla: Bursting the VoIP Bubble

Preston Gralla savages the Vonage IPO and the Skype acquisition in this post titled Skype and Vonage: Can You Hear the VoIP Bubble Bursting?. It’s hard to disagree with his assessment. Vonage closed at $9.60 on Friday, down from the $17 opening price a few weeks ago. Skype unveiled a series of highly expected, but not exactly earth shattering, announcements last week.

The hype around Vonage was an entirely cynical push to sell stock. Somewhere between inception and IPO, Vonage took a profound 90 degree turn and became a telephone company. Now, there are many prospering telco’s in the market today, but they’re not generating profits on their landline businesses. Growth and profits are coming from their wireless and internet access businesses. It’s highly unlikely that Vonage will ever turn a profit, given that they are a pure play landline company.

Skype, however, has much more promise than was exhibited at last weeks DevCon. It’s here that I differ substantially with Preston. The ecosystem of players that Skype is building has the potential to profoundly change the comms market, because for the first time you can actually treat a voice “network” as a platform. For some time, enterprise IT departments have been able to build sophisticated voice applications on their networks, because they have controlled them. With Skype, it can now be done on a public network.

{ 2 comments… add one }

  • mark evans June 18, 2006, 4:37 am

    alec,
    it does seem somewhat strange there so much savaging of vonage while skype, in general, still has a lot of goodwill, notwithstanding the fact ebay likely massively over-paid for it. what's the difference? i think vonage comes across as an investment vehicle for jeff citron and his VC supporters while skype is seen as a disruptive, technology play with lots of fascinating potential. perhaps that's the genius of niklas zennstrom and janus friis, who sold the world on skype's potential and then got some help from tim draper to sell skype to ebay.

  • Alec June 18, 2006, 10:52 am

    Agreed, and I guess I come down firmly in the "Skype is disruptive" camp.

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